BASF, the world's largest chemicals company, has said that it will expand a restructuring program in North America after reporting lower-than-expected second-quarter sales and profits.
Overall group sales declined by 1.6 per cent to €8.2 billion during the quarter, attributed by BASF to the drop in the value of the US dollar over the last year, and despite an increase in sales volumes by 3.2 per cent and higher prices, according to the group's chairman, Dr. Jürgen Hambrecht.
Pretax profits rose 1.2 per cent to €832 million, but the ongoing cost of restructuring in the North American Free Trade Area (NAFTA; US, Canada, Mexico) pegged this back to €774 million, 5.3 per cent lower than in 2002. Net income also plummeted 61 per cent to €195 million as a result of higher income taxes, mainly due to a one-time effect of €124 million related to corporate income tax.
Analysts at JP Morgan and Lehman Brothers reduced their earnings 2003 forecasts for the group on the back of the results statement, but the former said that BASF's fundamentals remain strong in the face of a difficult global economic climate.
Hambrecht commented that he does not expect an economic upturn until the fourth quarter at the earliest, and stressed that it will require considerable effort to achieve the previous year's level of sales and earnings in 2003.
In the NAFTA region, BASF plans to reduce its fixed costs through a two-phase restructuring programme, which will yield $250 million in savings. The program will involve the loss of around 1,000 jobs in the group's service functions in a first phase, followed by the possible closure or sale of 40 sites in the region.
This programme comes on top of BASF's current one, which kicked off in 2001 and is budgeted to save about €1 billion by the end of this year.